Closing Time : Effects of the closing mechanism and design on market quality

• We study the effects that closing batch facilities have on liquidity, price efficiency, and market integrity by exploiting the change in closing mechanism of 43 exchanges around the world. The main analysis supports the idea that the use of batch facilities improves market quality. However, we find evidence of the importance of auction design in explaining the performance of the auction. Closing auctions tend to be more beneficial if they integrate a randomised closing time and price stabilisation systems. Transparency and flexibility are generally detrimental. The results also show that the level of development of the market and the liquidity of the stock are relevant in determining the effects of batch facilities. Our findings have implications for regulators and exchanges seeking to improve the efficiency and integrity of their capital markets.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Keyword

företagsekonomi

Business Administration

Publication and Content Type

vet (subject category)

ovr (subject category)